Winter is looming and although South Africa's energy problems are far from over recent developments have sparked some optimism, particularly in the renewable energy field.
"There is no doubting the success of the country's first bold steps towards encouraging private sector participation in energy investment," says Gregory Nott, Werksmans Attorneys Director.
Referring to the Renewable Energy Independent Power Producers Bidding Programme, Nott says investors, advisors and other players have flocked to take part in the programme, to which investors have already pledged about R50 billion.
"This is a clear reflection of the Department of Energy's capable handling of an extremely intricate bidding process," he says.
Through the programme, the Department aims to procure a total of 3 725 Megawatts of energy from renewable sources such as wind, solar, biomass, biogas and landfill gas, among others. It consists of five bidding phases or 'windows', the first two of which closed in November 2011 and March 2012 respectively.
So far, the programme has been immaculately executed, with industry watchers noting the Department's comprehensive bid specifications, inclusive consultation process and disciplined approach to deadlines, not to mention the integrity of the process of selecting preferred bidders.
"This administrative efficiency has gone hand in hand with high-level political support throughout," says Nott, pointing to the Minister of Energy's speech at the recent Energy Indaba 2012 in Johannesburg.
"The Minister's speech showed a keen understanding of the importance of creating an inviting environment for investors through policy stability, clear and consistent regulation, and the creation of viable opportunities for achieving sound investment returns."
Nott says an example of the steps being taken to create viable investment opportunities in private energy generation is the proposed Independent System and Market Operator (ISMO) for South Africa. ISMO will be responsible for procuring power from the Independent Power Producers, with the aim of eliminating conflict of interest between the buyer and seller of electricity, and protecting all players from potential market abuse.
Government should always be the champion in setting the scene for private sector participation and in this case certainly, it has fulfilled that role well," he says.
"By creating an enabling environment, the authorities have ensured that investors will come - and in impressive numbers too." No fewer than 53 bidders responded to the first renewable energy bidding window, of which 28 were selected as preferred bidders, and 79 to the second window.
The next major milestones in the bidding programme are the Department of Energy's selection of preferred bidders from the second window and announcement of details about the third bidding stage.
"Another milestone that will also be very closely watched is the signing of procurement agreements and financial close with the preferred bidders from the first window," says Nott.
This is due to be completed by 19 June 2012.
Through its Renewable Energy IPP Bidding Programme, South Africa is pointing the way for countries throughout Africa to capitalise on their natural energy resources and attract private sector investment.
"While there is no single magic formula in a continent as diverse as Africa, South Africa has shown that following a few simple ground rules can give investors the reassurance they seek and open up pathways towards achieving energy security for citizens," he says.
"The deft handling of the renewable energy bidding programme has definitively showcased Africa's ability to mobilise and orchestrate an extremely complex bidding process and earned the respect of investors."
Gregory Nott - Werksmans Attorneys Director
